I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

Unless you attended the June 14 Wall Street conference run by San Francisco-based ArcView Investor Network, a group of entrepreneurs looking to invest in legal cannabis companies, you missed the chance to hear pitches from 18 cannabis start-ups. Those 18 start-ups do not grow or sell marijuana, but they sell growers the equivalent of the gold rush’s picks and shovels – providing security, lighting and storage.

Not surprisingly, Troy Dayton, ArcView’s CEO is very bullish on the opportunity to invest in the marijuana industry. Danton told the New York Times, “This is a historical moment. [The cannabis industry now is like dot-coms were in the middle 1990s.] We’re announcing to Wall Street, this is the real deal.”

Kleiman, co-author of a book on marijuana legalization, believes that promoting investment in the marijuana industry — while potentially fraudulent — at least has the benefit of a more industry-friendly regulatory apparatus than do those who grow marijuana.

To be sure, Kleiman noted in a June 15 interview, “Colorado and Washington state — representing 6% to 7% of the total market — are legalizing commercial production of marijuana.”

The Times notes that a total of 19 states have legalized the use of marijuana for medical purposes but Kleiman argues those 19 are quite different. “Colorado and Washington soon will have state-legal non-medical cannabis. Those two plus California and Oregon (and formerly Montana) have such wide-open medical access laws as to amount to virtual legalization. The other medical-marijuana states have tight rules and relatively few users.”

But marijuana is illegal at the federal level — creating confusion about whether federal or state law will be applied in different situations. “There’s no legal doubt about which laws apply. Federal legislation is the law of the land. The question is about how the feds, with sweeping legal powers but limited manpower, will coordinate with the states where state law allows what federal law forbids,” explained Kleiman.

Kleiman thinks marijuana will be legalized at the federal level “in Hillary Clinton’s second term” — by which he means between 2020 and 2024.

This confusion got a California marijuana grower in big trouble. As Kleiman explained, “I know of a grower in California who was grossing $8 million a year and complying with state law while paying taxes. Federal authorities stumbled across his operation after two men were spotted breaking into his warehouse. The police said they smelled marijuana plants. Federal agents conducted a raid and confiscated 1,962 plants and 200 pounds of marijuana. Now he is facing the possibility of five years in prison.”

The twin risks that grower faced — the risk of going to prison and the risk of investing, say, $1 million in a growing operation and having it wiped out by vandals — suck the profit out of the growing business.

Kleiman believes that there is no legal risk and could be decent profit potential for operators of industry trade journals and Consumer Reports-like web sites. An example of such as site is “Leafly, a Web site that allows users to review medical cannabis strains and dispensaries,” according to the Times.

However, once growing pot becomes legal, most of the profit will be let out of the bag. “Marijuana is a $35 billion a year industry at retail. But 99% of that value is the price of buying an illegal substance. Once pot becomes legal, it becomes a $350 million a year industry based on the estimated farmgate price — a commodity with thin margins that is akin to selling tea bags.”

If marijuana were legal, Kleiman’s colleague, Jonathan Caulkins, computed that simply producing the THC — an active ingredient in marijuana — consumed by Americans annually from pot would require only “35,000 acres on 35 farms in Iowa,” explained Kleiman.

Kleiman believes that some growers may figure out a way to brand their pot for which people will pay a price premium. “Branding pot could be more like the Scotch business where tremendous profit is made on very high priced blends. But we don’t know yet whether a similarly big proportion of the profit from marijuana will be made on premium-priced product.”

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